There was relative calm in the currency market overnight as the crisis in Turkey took a breather and the Turkish lira clawed back some of its steep losses.
The crisis is far from over, however. Turkish President Recep Tayyip Erdogan vowed that the country will boycott American electronic devices in response to the doubling of tariffs put on Turkish goods. So far the central bank has defied calls from analysts, world leaders and finance chiefs to boost interest rates to combat rampant inflation and stem the lira’s losses.
The dollar is down slightly as the South African Rand and Mexican peso and other emerging market currencies have rebounded from their decline yesterday. However, the greenback remains in familiar ranges against its G-10 rivals.
There is no major fundamental data slated for today. Retail sales tomorrow remains the biggest domestic risk even on this week’s docket.
The Euro stemmed recent losses against the U.S. dollar overnight but remains near a 13-month low. The common currency found some relief as the rout of Turkish assets moderated overnight.
The economic docket showed the Eurozone grew at a faster pace than previously reported. Eurostat said that the region grew at a 0.4% pace in the second quarter, besting previous estimates by 0.1%. A separate report showed that French unemployment dropped.
The beleaguered pound sterling failed to make gains against the U.S. dollar despite positive data being released. Data showed that U.K. unemployment dropped to a 43-year low in the second quarter. However, the number of jobs added (42K) was a little below expectations. A deeper look at the data showed that wage growth slowed to a nine-month low and negated any of the sterling’s initial gains.